Buffett on Need to Reduce Government Deficits

The Greenback Effect by Warren Buffett
The United States economy is now out of the emergency room and appears to be on a slow path to recovery.
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Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P.
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Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.
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Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.
Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.
Related: Warren Buffett Webcast on the Credit Crisis – The Long-Term USA Federal Budget Outlook – Berkshire Hathaway Annual Meeting 2008 – Federal Reserve to Buy $1.2 Trillion in Bonds, Mortgage-Backed Securities

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Almost a decade after it all began, the Federal Reserve is finally talking about unwinding its grand experiment in monetary policy.
And when it happens, the knock-on effects in the bond market could pose a threat to the U.S. housing recovery.

WASHINGTON — The U.S. Federal Reserve stuck to its plan to buy US$85 billion in bonds each month to push down borrowing costs and prop up the economy, citing risks to growth from recent budget tightening in Washington.
Describing the economy as expanding moderately in a statement that largely mirrored its March decision, Fed officials cited continued improvement in labor market conditions.

The federal government will run a $1-billion deficit in the current fiscal year – even if it uses all of its contingency fund – says a new report from the parliamentary budget watchdog that casts doubt on the Conservatives’ promise to balance the budget in 2015-16.
The PBO updated the state of federal finances, based on the Bank of Canada’s Monetary Policy Report released last week, which downgraded economic growth for 2015.

Berkshire Hathaway Inc., which has struck deals to expand its utility business in Nevada and Western Canada, plans more investment in the industry, in part by betting on renewable power, Chairman Warren Buffett said.
“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity,” into the energy business, Buffett, 83, said Monday at the Edison Electric Institute’s annual convention in Las Vegas. “And we’re going to keep doing that as far as the eye can see.”

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said investors should bet on the “natural juices” of capitalism in the U.S. even as lawmakers struggle to narrow the budget deficit.
People tend to “focus too much on what the government’s done, and to give them either credit or blame,” Buffett said in an interview conducted by the chief executive officer of Business Wire, the Berkshire subsidiary that distributes press releases. “The real credit belongs to our system.”

Sorry to post one of those headlines that belong in "Questions to which the answer is no", but it's not me who's raising the issue; it's James Kwak and Ross Douthat. The argument goes as follows: the fiscal cliff provided the most favourable possible circumstances for Democrats to push for a tax increase.